Which Invoices Qualify for Factoring? An Eligibility Guide

An invoice generally qualifies for factoring when it is for work you have delivered, billed correctly, and that a creditworthy business customer owes you without dispute. Factoring companies review both the invoice and the customer who will pay it, so eligibility depends on more than your own business.

What makes an invoice eligible

• The goods were delivered or the services were completed.
• The invoice is accurate and addressed to a business customer.
• The payment terms are clear.
• The invoice has not already been sold or pledged to another party.
• There is no open dispute about the amount or the work.
• The customer is creditworthy and pays reliably.

What can make an invoice ineligible

These are common reasons, and the exact rules vary by provider:

• The work is not finished or has not been accepted yet.
• The invoice is disputed, partially paid, or subject to credits or deductions.
• The customer is a consumer rather than a business.
• The customer is related to you or owned by the same people.
• The invoice is already assigned to another lender or covered by their lien.
• The invoice is well past its due date.

What the customer side looks like

Because the customer is the one who pays, a factoring company looks closely at them: their credit, how reliably they pay, and how much of your billing depends on them. A newer company with strong, established customers can often qualify when its own financial history would not support a bank loan.

Documents typically requested

These are commonly asked for, though requirements differ:

• Copies of the invoices you want to finance.
• Proof the work was done, such as a signed proof of delivery or approved timesheets.
• The contract or purchase order behind the invoice.
• A current accounts receivable aging report.
• A list of your customers and their payment terms.

How to make more of your invoices eligible

1. Invoice promptly and accurately, with the details your customer's accounts payable team expects.
2. Keep delivery or approval evidence with every invoice.
3. Resolve disputes before you submit an invoice.
4. Tell any new lender about existing liens or facilities up front.
5. Keep your aging report current so you can see problems early.

How it looks in different industries

Documentation differs by industry. Trucking companies rely on signed proof of delivery, staffing agencies on approved timesheets, and manufacturers on shipping records. Work for government agencies follows its own payment rules, which our GovCon Funding division handles.